QuantitativeExhaustion
Short

US Equity Markets Artificial Lift

FX:SPX500   S&P 500 index of US listed shares
1534 54 34
SKEW/VIX Indicator - OIL             Volatility OVX            

SKEW/VIX Index compare, is a new indicator that I built here on TradingView (you can read details how it was constructed in the related link below). When combining SKEW with VIX             , we can see significant market tops/bottoms and displacement/divergence. As you can see in the chart, S&P             has been in a tight upward channel since October, 2011. SKEW/VIX and Oil             also marked a significant low in October, 2011. SKEW/VIX remained in upward trend from the low, and set many more highs until June 30 2014. It was in June, where Oil             started it's panic selling, and eventually breaking the support stronghold held since the October 2011 low. From June 30, 2014 SKEW/VIX peak until now, both oil             volatility index OVX             and S&P             volatility index VIX             have risen significantly. With SKEW/VIX trending down toward a lower sub 5 level, I would call our S&P             run since June 30th, an artificial lift. Eventually we will see a major correction.


VIX             has been quietly trending upward. On this chart notice the higher lows.


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Oil Volatility OVX             has also increased volatility in the S&P             and follows VIX             closely.

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I agree , although i'm a momentum investor/ trader, I really think that the market "topped" last summer in June/July .
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Yes, right before Oil started selling off. US markets are getting frothy for sure. With US Dollar even higher than last quarter, very few multinational corps will beat earnings estimates. We also have added pressure coming from the Federal Reserve.
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look like the volatility is going to drop based on your charts.
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Looks like trend is moving higher.
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hmm, i am new to SKEW, gotta read about it
i do have a monthly complicated relationship between Crude oil and SPX
Mixed relationship between Crude Oil & SPX
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Similar action in 1985.
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Super interesting. Similarly the SPX/VIX has been flashing similar divergences since last summer. Really just a matter of time before the cookie crumbles.
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SPX/VIX convergence really. Both moving in same direction , upward.
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jangseohee jdouce03
the last two time when 8/20ema did a death cross, it was game over
but in Feb 2015, we did had a death cross, SOMEHOW, someone somewhere did something to clear that death cross
and the ratio is also in megaphone!!!
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8/20 cross has shown every bear market. Maybe we are prepping up for a double.
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Price is too high for S&P500
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Great piece JR, it seems that alot of indicators are pointing the same direction. I can add to this the ratio of NYSE Stocks making new highs over the SPX
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The number of stocks trading above its 200-days moving average continues to diverge and deteriorate
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The volatility studies of the TLT/SPX which is breaking higher
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jangseohee Technician
Triplets of bearish divergence are required to bring multi years of bull down
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BobbyBlueShoes jangseohee
Triplets shmiplits. What droth. All we need is a Yellen.
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jangseohee BobbyBlueShoes
Yellen is playing with the chart!
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Great studies to look over. Volatility is picking up everywhere and good stocks momentum is slowing.

It would be interesting to see a chart for stocks that have greater than 10% short interest, hitting new highs or breaking 50 Day Moving Average. We often see an indication of bad companies hitting new highs before market corrections.
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This thread is stuffed with useful information :D
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sometime ratio doesn't really work but..
comparing the 3 ratios, by and large, they move in same direction
lately, SPX/TLT has start to diverge

Any fundamental explanation on that?

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claydoctor jangseohee
The mystery in all this is the currency wars and rate manipulations we did not ever have before, to this magnitude. It is skewing historical charts. i.e. the correlation between the EURUSD and Oil. There is less Oil demand and 5 MIL barrel per day supply from fracking, Saudi's wanting to punish the frackers, causing Oil stocks to correct, but the loss of jobs and that sector down, has not brought down the stock market farm. Rigs are shutting down, but we are having now called Fracking Log, which is a back log of fracked still still being produced and flooding the market, and we are running out of storage. Until that slows, might be months from now, OIL price will not bounce, and may reach $30. When the Euro reaches parity with dollar or below, and Euro strengthens, as will other currencies, , dollar corrects, Oil bounces. And then there is the GDP to debt ratios of the US and especially Japan. If Yellen and the FOMC raises rates, our debt and Japan's debt is so astronomical, the interest payments will soar, and cripple if not bankrupt each, causing a correction in the market, and a bond debt downgraded... which means there will be NO PLACE TO INVEST, and everyone runs to CASH. But with so much cash now from the printing, cash will be worth less, or eventually worthless. The whole thing is coming down to a death triangle, where there is nothing left to be done, and no escape. WHY will it come to this? ... because the leftest US government focused on promoting a political agenda (print, borrow, debase, save the earth, cool the planet, allow technology to replace humans and their jobs- at whatever the cost irresponsibly) , when they should (even if they did not want to have to do it) have totally focused on economics, and whatever it took to recover from the housing crash (repair credit, create a corporate friendly-tax friendly environment to CREATE JOBS!). Bottom line is, we did not reach escape velocity because we did not do whatever it took to create jobs. This next earnings season will bring down this market, which is very artificial. Stock buy backs was the last trick in the corporate bag to elevate stock prices, and there is simply a limit to how much they can do that. Unless they have another trick, the gig will be up, and there will be no way to inflate stock prices of corporations unless they can realize real actually revenue and profit growth again. Stockholders are not customers.
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BobbyBlueShoes claydoctor
Another gig? Don't underestimate the resolve of the FED QE4. This needs to be a real node in everyone's decision tree. Many commentators say no for many reasons, but Central bankers have a historical trend of getting things wrong more than right. We're already down the road of no return, it might as well look like a gold road.
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jangseohee BobbyBlueShoes
Kick the can down the road
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BobbyBlueShoes jangseohee
Yellen is pushing the Bullard down the road. Long past tin cans. :-)
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claydoctor BobbyBlueShoes
She cannot raise rates, its economical suicide. Just social security payment rising alone will bankrupt us. The can gets kicked further until....? Its like in a movie, when the bumbling villans get to an alley dead end and look at each other and say :"Ok, what is our next move, we have one right?" And each other says, "I thought you would know, no, not me, I don't know".
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jangseohee claydoctor
claydoctor, raising the rate will kill the rest of the currency making Dollar Index break the technical chart and then kill Corporate America :-)
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jangseohee claydoctor
hence this option is OUT
only two left, do nothing or QE4 to catch up the DAX
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BobbyBlueShoes jangseohee
QE4 objective would not be to catch up anything. It would be to stave off deflation. Deflation has the ability to bring down empires. Increased equities is a by-product.
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BobbyBlueShoes claydoctor
Economics 101 says she cannot. Be prepared for all three possibilities. Trading and hope does not go well together.

In a conspiracy theory world, oligarchs would sacrifice the economy in the short term, for a Iran/Russia destroying strong dollar. What do you think the words "currency wars" mean. Power in the long run > killed economy in the short run.
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jangseohee BobbyBlueShoes
you do have a point :-)
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jangseohee BobbyBlueShoes
ROFL
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BobbyBlueShoes jangseohee
I thought that was a pretty cool play on words. Pats himself on back. lol
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jangseohee BobbyBlueShoes
by the way, the entire economy crisis and cycle has been planned in advance, Fed knows when :-0
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BobbyBlueShoes jangseohee
Three things things not many people know.
1. Last year December, the FED ordered survival kits for all it's FED facilities. Odd?
2. In the motion to extend federal funding in December, a clause was added to the senate passed motion, to release all liability of derivative and derivative type securities from US banks in a market shock. The federal government, i.e. US citizens will bear the cost. What is the value of derivatives owned by the top 20 banks in the US, $300t+. Funny thing is, the wording was almost 100% the same as Citibanks proposal, when they lobby'd for it. So the cost to US citizens will be the unwound value of those leveraged securities. Even if that's only $0t it's still alot.
3. By lawful decree all US exchanges now have kill switches to "save" the market in shock events. Passed in December. Literally, the market will be switched off. Almost all markets have gone into "self help" status" at some point in the last 3 months, mostly BATS. On every occasion it was after a downturn due to bad news. Immediately after system resolution, the market climbed. Manipulated? Testing?

We live in a society where we think everything is independant and auditable, with monitored conflict of interests. What if it were completely the opposite. It wouldn't be that far a stretch.
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jangseohee BobbyBlueShoes
and then comes this rule again, circuit breaker if DJIA drop > 500 points?
and we cannot short the stocks ??
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BobbyBlueShoes BobbyBlueShoes
only $10t*
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jdouce03 jangseohee
Might as well be kicking a grenade down the road. Yes, the pin is pulled.
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jangseohee jdouce03
grenade is only enough to kill same ants xP
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IvanLabrie PRO claydoctor
Indeed, great analysis.
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Starting in October 2014 price has been trying to break a 60 year trendline and was clearly rejected. It's been support and resistance multiple times in the past. I don't think price has the momentum to break it currently, believe it needs to correct inorder to go higher. Plus, looking at all two term US Presidents, expecially starting with Reagan, the average stock market bull run in their second term is about 2.5 years. I believe we could see a correction before 2500 es. Although I could be wrong.
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Very good observations. You're correct. Does not look like we can get over the median channel without a correction.
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Gap up today. Very bullish near term.
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jangseohee QuantitativeExhaustion
could the skew to vix still under triangle?
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QuantitativeExhaustion QuantitativeExhaustion
yes it does look like a triangle.
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maintain status QUO, cant raise rate, no QE, ROFL
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Can't raise rates while ECB is buying bonds. This would make the dollar rocket and Euro to break below historical lows too quickly.
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Will probably get a rate hike 6 months after ECB concludes QE program(s).
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jangseohee QuantitativeExhaustion
the next triumph card to play around will be unemployment rate.. it will never get to < 5%, :-)
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I think unemployment rate will hit 2 - 3% eventually. However, wages will stay flat or with very slight growth. Wage growth causes inflation, not unemployment numbers.
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Algokid PRO jangseohee
not this year , that for sure.
Goldman Sachs analyst Jan Hatius said this a few hours ago " "Our forecast remains for a September hike, but the risks now appear slightly skewed toward a later liftoff,"

Morgan Stanley " With our expectation that core inflation falls further from goal,and the lingering threats to growth and inflation from the rapid appreciation of the US dollar, we look for the Fed to forego rate hikes this year."



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I'd say March next year. Unless ECB / Japan together decides to continue adding more QE.
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jangseohee QuantitativeExhaustion
"just because we removed the word patient from the statement doesn’t mean we’re going to be impatient." Mdm Y
+2 Reply
You are correct stock market is in controle from the fed artificial lift by the centrale banks something is going wrong manipulate the vix is controle by the fed normale can not be so low normale level is always been 18 to 22 dollar ....?
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QuantitativeExhaustion pascal.lambrecht.522
VIX? normal range is actually 10 to 18. Now we have another player that's almost as big as Fed, ECB. ECB is now moving on a QE much like Fed Reserve.
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Vix will be replace soon to 16 dollar after juni or July by the fed you will see it ... Than fed rate hike will come one month later maybe August or September or October
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The fed controle the game keep artificial ,,,market lift VXX I s keep artificial low by the fed
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